Monthly Archives: April 2009

Craigslist Warns Off Criminals

It was inevitable that the criminal mind would try to exploit online classified-advertising forums such as Craigslist. Criminals are active in the real word, and the virtual world is just an extension of the real one.

However, I suppose the lack of real privacy online works in society’s favor when it comes to criminal activity. When you are on Craigslist or Facebook, you are traceable. You leave electronic tracks behind.

On Facebook, the proprietors can use those tracks and your user data to exploit you as a consumer entity in their dealings with advertisers. That’s the dark side of being an online denizen of an electronic social network.

The bright side is that criminals who use Craigslist typically will be identified, apprehended, prosecuted, and imprisoned. They are highly unlikely to get away with their crimes.

Maybe We Expected Too Much from the IT Industry

The Enterprise Strategy Group’s Jon Oltsik makes an interesting observation regarding Oracle’s perplexing acquisition of Sun Microsystems.

Instead of passing judgment on whether the deal represented a smart move by Oracle — I’m still not sure what to think, though I suspect Oracle might have done this deal for defensive, wrongheaded reasons — Oltsik expresses profound sadness at the passing of Sun and of what it signified back during the heyday of the IT industry.

The second paragraph of Oltsik’s piece reads as follows:

When I started in the tech business over 20 years ago, it was extremely young and exciting. If you went for a drink after work, you would find a saloon full of folks from Digital Equipment Corp., Data General, EMC, Lotus, McCormick & Dodge, and Prime Computer all out doing the same. Much to IBM’s chagrin, high tech had been taken over by a bunch of 20 and 30 year olds in Boston and San Jose, Calif., who were going to change the world.

He ends the piece with these words:

I’ll miss Sun’s irreverence, its optimism, and its innovative spirit, but most of all I’ll miss what Sun represented, the last vestige of the golden age of the tech industry. Unlike those heady days in Boston back in the 1980s, our industry is now mature with only a few tech giants left. Cisco Systems is now building its own servers and Oracle is a hardware company. I guess we did change the world to some extent, just not the way we thought we would.

Sun was irreverent, no question, but it was always a business in an industry that gradually, unavoidably matured. Convention, predictability, and stolidness come with maturity, and so it was for the IT industry and for its major corporate players. Like the automotive industry and so many other industries before it, IT was bound to go from being a freewheeling scramble of innovation and seemingly irrepressible energy into something more culturally homogeneous and ponderous. It also was bound for consolidation.

There are fewer areas open for world-changing innovation in the IT realm than there were before. The bigger players — IBM, HP, Cisco, Microsoft, Oracle, Intel, and Google — are looking to strengthen their competitive positions as they use their vast size and resources during the current worldwide recession. Meanwhile, some companies that were big names — Motorola and Nortel come to mind — have fallen off the map, perhaps irrevocably.

So, yes, IT has changed, become older, more seriously mature. Have some of its denizens done likewise?

Like Oltsik, I am of a certain age, having been around this business for more than 20 years. I think what we thought we saw back in our younger days perhaps never existed, not objectively, anyway. I think we might have seen things through the prism of youth, refracted and brightened with an optimistic attitude, boundless energy, and a paucity of the sort of real-word experience that engenders skepticism and even cynicism.

Maybe industries are always the same — regardless of whether they’re at one point or another of their life cycles — and it’s only the perspectives of the people within them that change.

Making Sense of SGI’s Decline

Martin Veitch of CIO UK Magazine reviews the final disposition of Silicon Graphics, acquired for approximately $25 million in cash by Rackable Systems, and tries to make sense of it all.

SGI was no Apple but it had (still has) many loyal fans. It created crack workstation and server technology, reinventing computer graphics along the way, but also made a series of mistakes and became synonmous with changes in direction and spotty balance sheets. It was a Unix and RISC computing mainstay, had a doomed love affair with Microsoft, fell for Linux and ended up hugging Intel.

It stayed niche too long or it got into commodity too late. Or it didn’t stick to its knitting. Or it was badly managed. You figure it out: it’s just sad to see another great name go.

There’s usually more than one reason why anything goes right or goes wrong. Business success and failure depend on the internal strengths of a company as well as on external factors. That said, I believe that the Silicon Graphics was a victim of its own success. It suffered from a classic case of entrenched player’s dilemma.

SGI had great graphics workstations, ruling Hollywood as well as other simulation-intenstive application environments. That success became a trap, though, when SGI became understandably reluctant to cannibalize its installed base with cheaper, commodity-based Intel-based workstations running Microsoft’s Windows operating system.

Unfortunately for SGI, other vendors were only too willing to chip away at its market dominance with commodity products. They built their businesses on slimmer margins and higher volumes, and they had the supply chains and economies of scale to strike while SGI procrastinated.

In the end, what happened to SGI was an inevitability. Many people within the company saw the threat approaching in the rearview mirror, but they were unable or unwilling to do anything to stop it.

Oracle Likely to Slash Jobs Aggressively at Sun

I can’t argue with the arithmetic Tony Sacconaghi, a technology-market analyst at Sanford C. Bernstein & Co., has done.

In analyzing the acquisition-announcement proclamations of Safra Catz, president of Oracle, regarding the profitability that the acquiring company intends to squeeze from Sun Microsystems, Sacconaghi concludes that Oracle could attain those earnings numbers if it shed as many as 10,000 Sun employees.

In a statement earlier today, Catz said Oracle expects the Sun deal to contribute $1.5 billion toward its earnings next year and $2 billion in the second year of the acquisition, making it “more profitable in per-share contribution in the first year than we had planned for the acquisitions of BEA, PeopleSoft and Siebel combined.”

Crunching the numbers, Sacconaghi concludes that Katz’ earnings targets suggest “incremental headcount reductions of 5,500 to 10,000 depending on timing.”

Sun has been executing staff cuts of its own, but any Oracle plan is likely to be far more aggressive in that regard. For now, Oracle has no comment. I wouldn’t expect them to tip their hands regarding headcount reductions.

Sony’s Playstation 3 Faltering

At ExtremeTech, you’ll find a good article, replete with hard data and solid statistics, arguing that Sony’s Playstation 3 is on the verge of becoming a lost cause in the game-console wars.

Outflanked by Nintendo’s Wii casual-gaming sensation on the hardware side, and graphics-intensive game titles that seem to fare better in the marketplace on Microsoft’s Xbox 360 than on the PS3, Sony finds itself looking increasingly vulnerable with its flagship console.

As the article’s author Loyd Case contends, it doesn’t help that decent and improving Blu-ray players have hit the market recently. Last year, Sony could and did argue that the built-in Blu-ray player that came with the PS3 made the console a defensible purchase even for consumers who weren’t avid gamers.

The market numbers — in North America and in Sony’s home market of Japan — seem to argue convincingly that Sony is between a rock and hard place. It’s lagging in console sales, it isn’t attracting hit-game titles that are exclusive to the PS3, and it is not winning the battle for the hearts, minds, and pocketbooks of game developers.

Sony is left with the dilemma of either continuing to fight a losing battle in the marketplace, risking complete irrelevance in the process, or dramatically slashing the street price of the PS3, which would leave Sony potentially selling the box at a loss in order to pump up sales and regain the attention of game developers.

Even that option, which is probably the course it will follow, is not guaranteed to rescue the PS3 from market oblivion.

Analyst Hedges Bets on Microsoft’s Quarter

If an Associated Press report is to be believed, Thomas Weisel analyst Tim Klassell seems to be hedging his bets on Microsoft’s results in its just-finsiehd quarter.

In a note to clients, Klassell, noting industry-wide weakness in PC and server shipments, first says that Microsoft’s analyst-consensus estimates are at risk. Those estimates, for the company’s fiscal third quarter ending in March, peg earnings at 39 cents per share on revenue of approximately $14.1 billion.

Elsewhere in the client report, however, the analyst suggests that Microsoft could surprise the market one way or the other, perhaps on the positive side. Finally, though, he pushes himself off the seesaw and declares the following”

“But, again, we think that is less likely and we feel more comfortable with our more conservative outlook.”

I understand that it’s not easy to play the analyst game. My own view is that Microsoft will be light on the revenue side but hit its earnings estimate.

I could be wrong, though. I’ve been wrong before, and I know I’ll be wrong many more times before my pathetically mortal existence on this planet is eternally expunged.

However, is it too much to ask that analysts state their assumptions, give clear guidance, and take unambiguous positions? Okay, probably so. Still, one can dream.

Former CFO’s Lawsuit Reflects Dysfunction at Motorola

Irrespective of whether one believes the claims in the whistleblower lawsuit filed by former Motorola CFO Paul Liska, one is forgiven from wondering how Motorola let the situation devolve into a debacle in which the company’s dirty laundry will be unfurled in court.

As reported by the Wall Street Journal, Liska claims he was fired after he questioned the accuracy of financial forecasts from the company’s troubled cellphone unit. Motorola contends Mr. Liska orchestrated his role as a whistleblower to cover up for his poor performance as CFO.

Whatever.

Somebody’s telling the truth, or at least the truth insofar as it can be discerned, and somebody isn’t. However, given the plummeting fortunes of Motorola, and especially the handset division that is at the core of this dispute, one wonders how and why the Motorola executive braintrust and board could allow a potentially deleterious distraction of this magnitude to materialize.

Even if one gives Motorola the benefit or the doubt and assumes the company is more in the right than the wrong, why couldn’t Motorola, in the spirit of enlightened self-interest, have made the necessary accommodation to ensure that Liska left the company amicably, without recrimination?

It leaves an objective observer to think Motorola’s potentates either have something to hide, as Liska asserts, or were inept in executing his departure. Either way, it’s another dark chapter for a company than can’t afford too many more before its obituary is written.

Motorola Getting Out of Bomb Fuses

When one thinks of Motorola, one typically doesn’t think of bomb fuses.

Instead, one thinks of a telecommunications company that has stumbled, perhaps fatally, in areas such as handsets, wireless-networking gear, and cable infrastructure, including set-top boxes.

It was a surprise, then, to learn that Motorola has decided to divest itself of an Israeli-based business unit that manufactures bomb fuses.

Although protestors in the USA have railed against Motorola’s sales of fuses and communications equipment to the Israeli military, a Motorola spokesman said that’s not why the company is selling the unit. According to the spokesman, Motorola apparently realized belatedly that military technologies, with the exception of communications equipment, aren’t aligned with its strategic direction.

Since Motorola’s strategic direction has been hard to discern in recent years, it’s perhaps understandable that the business unit had remained in the fold until now.

Nortel’s Non-Savvy Investment (Exhibit A)

In the summer of 2000, Nortel acquired Alteon WebSystems, a vendor of load-balancing and traffic-management switches, for $7.8 billion in stock. A short time afterward, the value of that stock plummeted. What’s more, ever since the technology bubble burst, Nortel has been on a seemingly inexorable path to oblivion.

Given that Radware announced earlier this week that it has successfully completed its $18-million acquisition of Nortel’s application delivery gear, which includes what remains of Alteon WebSystems, one would have to say that, even with its steadily depreciating stock taken into account over the past nine years, Nortel did poorly on its Alteon transactions.

Of course, the Alteon acquisition was just one of one many strategic and tactical missteps, in conception and execution, that Nortel has made during its decline and fall as a former networking-industry titan.

When one considers the comparative value that Cisco derived from its $5.7-billion acquisition of ArrowPoint Communications earlier in 2000, it’s clear that Cisco conceived and executed its load-balancing acquisition infinitely better than did its erstwhile rival with its purchase of Alteon.

What happened to the Alteon acquisition is symptomatic of larger problems that afflicted Nortel. For years, the company’s strategic focus has been blurred, its execution muddled, and its timing poor.

Hindsight is 20/20, of course, but even at the time Nortel made the Alteon acquisition, many observers were wondering why the company was buying into the load-balancing space and why it was overpaying for the privilege of having a seat at that particular table.